Biodiesel Commercial Aspects

Commercial Aspects - Part 1

Renewable biodiesel offers acceptable solutions to the problems of decreasing reserves of fossil fuels and their harmfully polluting green house gas emissions. Various types of biodiesel can help in overcoming the increasing energy demand worldwide. Biodiesel has the ability to eradicate the environmental problems, such as global warming and sustainability. The emergence of biodiesel and its global adoption as the leading fuel for transportation in diesel engines without any modification has led to significant increase in the production of biodiesel globally. According to a report prepared by the World Bank in 2017, biodiesel is projected to form about 70% of the transport fuel demand by the year 2040.

Biodiesel has been produced commercially since the last more than twenty years. Biodiesel production processes and technologies have developed and evolved almost continuously. Many different raw materials, which were not considered earlier, have also been identified for the production of biodiesel. The process technologies have also now reached the stage of even producing second generation biodiesels or biofuels. The commercial production of biodiesel has spread far and wide across the globe and manufacturing plants of varying capacities have been commissioned in the past two decades. These plants have been using the locally available raw materials as well as imported ones, such as palm oil. Many countries have introduced specific regulations for blending of biodiesel in diesel fuels for automobiles. Support from the governments, favorable policies and public support can play an important role in the development of biodiesel industry across the globe. Automotive fuel formulation regulations are expected to increase the market share of biodiesel leading to increase in its demand. The consumers also consider biodiesel as a superior and cost effective alternative to fossil-based diesel. Several market estimates have indicated that the demand for diesel and gasoline will keep on increasing through the year 2040. Thus, increasing biodiesel blending in diesel fuels will eventually lead to substantial reduction in the net greenhouse gases (GHG) emissions in the long term.

Raw materials used for biodiesel, its production trends and utilization are reviewed in the next few blog articles.

COUNTRIES AND RAW MATERIALS

China utilizes rapeseed (mustard) oil, cottonseed oil and jatropha oil as the major raw materials for producing biodiesel. It is expected that these vegetable oils will be replaced by waste vegetable oils or used cooking oils and the oil obtained from microalgae in the future. Indonesia, the largest producer of palm oil, produces and uses biodiesel made from palm oil. Biodiesel production costs in Indonesia are the lowest as compared to other countries as the fuels are being subsidized. The Indonesian Ministry of Energy and Mineral Resources (MEMR) has proposed a policy to substitute 15% and 20% of petrol and diesel fuels with bioethanol and biodiesel, respectively. Malaysia, as the second largest producer of palm oil, is also promoting biodiesel based on palm oil. At present, the country meets its B7 (i.e., 7% biodiesel in the fuel blend) biodiesel mandate. Thailand produces biodiesel mainly from palm oil, as it is the third largest producer of palm oil after Indonesia and Malaysia. Taiwan has also increased the production of biodiesel as a policy and is estimated to have produced 150 million lit of biodiesel in 2020.

Turkey is a leading producer of cotton and sunflower seeds, whose oil is used to make biodiesel. About 21876 MT of biodiesel were produced in 2013 and is increasing. Due to increasing energy demand, biodiesel production has become an essential commodity in Iran, which mainly uses feedstocks such as canola, cottonseeds, soybean to produce biodiesel. Other potential oil sources such as olive, sesame, safflower, sunflower, corn, almond and coconut oils, are also available as biodiesel feedstocks.

Africa has the capability of becoming the single largest producer of bioenergy crops in the world for the production of biodiesel. According to the estimates by the World Bank and others, biodiesel is projected to constitute about 60% to 80% of transport fuel in Africa by the year 2030. Therefore, scientific researchers are now exploring several non-edible oilseeds, which are widespread and abundantly available in the African forests, to overcome the food security problems related to the use of edible vegetable oils for the production of biodiesel. African countries, like Ghana, Zambia, Liberia, Tanzania, Ethiopia, Nigeria, Senegal, Kenya and South Africa are emerging as the major commercial producers of biodiesel. Jatropha, Jojoba, Mahua, Castor and Karanja oils have emerged as the common feedstocks of the production of biodiesel. Jatropha is the most popular non-edible oil feedstock for biodiesel in Africa. Biodiesel potential of Jatropha has been estimated for many African countries.

In Australia, the beauty leaf oil and castor oil have been identified as the two major non-edible oils for use as feedstock to produce biodiesel.

How the raw materials for producing biodiesel are shifting towards more sustainable feedstocks can be seen from the trend seen in the California state in the USA. In the year 2011, tallow was consumed to make biodiesel to the tune of over one million MT. Other raw materials were negligible. By the year 2016, consumption of other raw materials like distiller’s corn oil and fish oil increased substantially, especially that of distiller’s corn oil. Although tallow was the largest consumed feedstock, distillers’ corn oil consumption was close to tallow. About two million MT of tallow was consumed while more than 1.5 million MT of distiller’s corn oil was consumed for producing biodiesel. Consumption of used cooking oil (UCO) and fish oil also started in the same year. During 2020, the consumption of tallow reached to about 2.5 million MT, while that of used cooking oil reached to over two million MT and the consumption of distiller’s corn oil reached about 1.5 million MT, along with significant consumption of fish oil.

HISTORICAL PRODUCTION AND FUTURE PROJECTIONS

Global biodiesel production increased by a factor of 15% during the period 2002 to 2013. It is projected to increase to 110.6 million barrels per day by the year 2035.

Biodiesel production of selected leading countries in the year 2017 is presented in the following table.

TABLE 1: BIODIESEL PRODUCTION OF SELECTED COUTRIES (2017)

COUNTRIES	BIODIESEL PRODUCTION, billion lit
USA	6
Brazil	4.3
Germany	3.5
Argentina	3.2
Indonesia	2.6
France	2.5
Thailand	1.5
Spain	1.3

India, Indonesia, China, Norway, Argentina are some of the leading countries supplying biodiesel based on rapeseed (mustard) oil to the European countries in the EU, as of 2017. A few leading companies import palm oil in large quantities and convert it to biodiesel in their production facilities in Europe.

Biodiesel has succeeded as the first and the only EPA-recommended biofuel and demonstrated its ability to attain large scale production. In 2015, USA consumers used over 2.1 billion gallons of biodiesel, according to the US National Biodiesel Board. In the year 2014, domestic biodiesel production in the USA was 1.47 billion gallons. Biodiesel imports in 2014 were 510 million gallons which increased to 670 million gallons in 2015.

Biodiesel production in the European Union (EU, i.e., EU-28) in 2018 was reported to be 3.9 billion gallons, including that of renewable diesel. More than 990 million gallons of biodiesel were imported from developing countries in the same year. These imports were three times more than the biodiesel imports in 2017. Leading biodiesel importers in the EU are the Netherlands, Spain and Belgium, due to the large storage facilities available at their ports. Biodiesel is transported to other countries from the above countries for consumption.

Out of the total biodiesel imports of 3.329 million MT, Argentina supplied 1.648 million MT, Indonesia 0.785 million MT, Malaysia 0.435 million MT and other countries 0.461 million MT. The Netherlands imported 43% of these biodiesel imports, followed by Spain at 38%, Belgium 16% and other countries 3%.

The projected biodiesel production by major producing countries in the year 2030, their growth index, projected consumption and blending ratios are presented in the following table.

TABLE 2: MAJOR BIODIESEL PRODUCING COUNTRIES AND PROJECTED PRODUCTION (2030)

COUNTRIES / REGIONS	PROJECTED PRODUCTION, billion lit	PROJECTED CONSUMPTION, billion lit	BLENDING RATIOS, %	GROWTH INDEX, %
USA	8	6.9	15	6
Canada	5	5	10	8
European Union	22	14	20	8
India	32.1	31.1	10 – 20	11
Brazil	5	5.6	25	6
Argentina	11	1.9	30	5
China	5	5	10	17
ASEAN	13	4.1	20	8

The above projections may be negatively impacted to some extent by the increasing use of electrical vehicles as well as hydrogen gas as automotive fuel, by the year 2030.

Commercial Aspects - Part 2

Significant data is available for various feedstocks and production of biodiesel and other biofuels, especially for the United States of America. Several energy monitoring organizations collect, analyze and project production and consumption of various fuels including biodiesel in different countries and regions. These data have been collected over the past two decades. The upward trend in the biodiesel production and utilization of unconventional and waste products for biodiesel manufacture is evident from these data.

The following table presents consumption of selected raw materials or feedstocks for the manufacture of biodiesel in the USA. The term biodiesel covers usual biodiesel, renewable biodiesel, renewable heating oil, renewable jet fuel, renewable gasoline, etc. The feedstocks consumed for the production of ethanol (ethyl alcohol), such as corn, sorghum, etc. are not listed here.

TABLE 1: FEEDSTOCKS CONSUMED FOR THE PRODUCTION OF BIODIESEL IN THE USA (2021-22)

[million pounds]

	VEGETABLE OILS			WASTE OILS, FATS AND GREASES
YEARS / MONTHS	Canola Oil	Corn Oil	Soybean Oil	Poultry	Tallow (Beef)	White Grease	Yellow Grease
2021
January	W	213	683	34	84	53	263
February	85	155	552	34	66	50	198
March	123	195	740	43	83	64	226
April	W	211	700	36	93	64	248
May	W	257	788	32	119	59	270
June	W	241	663	19	135	70	290
July	123	237	792	21	129	59	331
August	142	199	815	18	120	55	305
September	106	167	756	18	90	54	219
October	116	217	832	15	141	67	321
November	133	244	818	17	112	49	347
December	126	301	937	20	160	51	368
TOTAL	>954	2637	9076	307	1332	695	3386

2022
January	64	249	791	15	141	43	364
February	W	188	741	13	130	38	306
March	W	212	908	15	127	47	338
April	101	211	839	13	130	57	402

[Notes – Yellow Grease includes used cooking oil. ‘W’ – Withheld to avoid disclosure of individual company data.]

[SOURCE – U. S. EIA]

As can be seen from the monthly data above, the feedstock quantity varies significantly in many cases. This may be due to the difficulties in the availability of those feedstocks. There could also be some seasonal variations in the availability of these feedstocks.

Among vegetable oils consumed for the manufacture of biodiesel, the soybean oil consumption is the highest at 9076 million pounds per year in 2021, in the USA. Soybean oil has remained the largest biodiesel feedstock for several years. Corn oil has the second rank with the consumption level of 2637 million pounds per year.

Among the waste oils, fats and greases, yellow grease, which includes the used cooking oil, is consumed to the tune of 3386 million pounds per year in 2021 and is the highest waste product consumed for the manufacture of biodiesel in the USA.

During the year 2021, in all more than 18387 million pounds of vegetable oils and waste oils, fats and greases were consumed for the production of biodiesel in the USA.

The following table presents data on number of biodiesel plants and total biodiesel production capacity in the designated PAD Districts in the USA, as of January 2021.

TABLE 2: BIODIESEL PLANTS AND PRODUCTION CAPACITY IN THE USA [AS ON 1 JANUARY 2021]

PAD DISTRICT	NUMBER OF BIODIESEL PLANTS	PRODUCTION CAPACITY, MMgal/year	PRODUCTION CAPACITY, Mb/d
PADD 1	13	152	10
PADD 2	37	1483	97
PADD 3	15	580	38
PADD 4	0	0	0
PADD 5	10	194	13
TOTAL	75	2409	157

[SOURCE – U. S. EIA] [NOTE – The totals may not be equal to the sum of components due to independent rounding.]

The biodiesel production capacity measures the estimated gallons of biodiesel that a plant is capable of producing over a period of one year, i.e., 365 consecutive days, starting on the first day of each report month.

The following figure presents monthly biodiesel production in the USA during the years 2018, 2019 and 2020, in million gallons. The total production varies over different months in a year, as can be seen from the bar chart. However, the total biodiesel production has remained almost consistent over the period under consideration.

FIGURE 1 :

The following table lists annual biodiesel production capacity and monthly biodiesel production in the USA for the years 2019 and 2020.

TABLE 3: ANNUAL BIODIESEL PRODUCTION CAPACITY AND MOTHLY PRODUCTION IN USA [2019 AND 2020]

YEARS / MONTHS	2019		2020
	Annual Production Capacity, million gallons	Monthly Production of B100 grade, million gallons	Annual Production Capacity, million gallons	Monthly Production of B100 grade, million gallons
January	2564	144	2515	134
February	2563	131	2515	132
March	2563	141	2514	151
April	2563	152	2514	144
May	2553	155	2514	152
June	2504	142	2514	151
July	2561	159	2509	162
August	2561	156	2459	163
September	2547	142	2460	159
October	2515	144	2454	160
November	2510	127	2451	151
December	2513	133	2476	159
TOTAL (ANNUAL)	---	1725	---	1817

[SOURCE – U. S. EIA] [NOTE – Totals may not be equal to the sum of components due to independent rounding.]

The following table presents operable biodiesel, renewable diesel and other biofuels production capacities in the USA for the years 2021 and 2022, in million gallons per year. Other biofuels include renewable heating oil, renewable jet fuel, renewable naphtha, renewable gasoline, etc.

TABLE 4: OPERABLE PRODUCTION CAPACITY OF BIODIESEL AND OTHER FUELS IN THE USA (2021 AND 2022) [million gallons per year]

YEARS / MONTHS	BIODIESEL	RENEWABLE DIESEL AND OTHER BIOFUELS
2021
January	2394	791
February	2394	791
March	2410	791
April	2410	971
May	2428	971
June	2428	911
July	2430	911
August	2430	911
September	2462	911
October	2461	1014
November	2389	1017
December	2244	1106

2022
January	2245	1468
February	2232	1468
March	2231	1469
April	2217	1922

[SOURCE – U. S. EIA]

Commercial Aspects - Part 3

TYPICAL BIODIESEL PLANT

Typical or average biodiesel production plant in the USA has about 30 million gallons annual production capacity. The plant construction cost is reported to be about US $ 1.75 per gallon of nameplate biodiesel production capacity (2021). This biodiesel plant is expected to consume only soybean oil as raw material and generally operates at 100% of the rated capacity. Usually, 9 pounds of glycerine co-product are produced per gallon of biodiesel.

There is significant variation in production capacity, efficiency and feedstock across the biodiesel industry. Soybean oil is the largest vegetable oil consumed for biodiesel production and it represents about half of the feedstock used to produce biodiesel in the USA.

Earlier, a conversion factor of 7.55 pounds of soybean oil per gallon of biodiesel produced was assumed. However, analysis of the soybean oil feedstock used and biodiesel production from the Energy Information Administration (EIA) for the recent years has revealed some variation in the biodiesel production efficiency over the years. The average conversion rate was reported to be 7.50 for all types of feedstock (i.e., soybean oil, canola oil, animal fats) during the period January 2017 through November 2020. The conversion efficiency reportedly improved over this period, averaging 7.57 in 2017 compared to 7.51 in 2020.

Previously, it was assumed that 0.71 pounds of methanol were used per gallon of biodiesel produced. However, analysis of actual methyl alcohol consumption per gallon of biodiesel reported by the EIA revealed that higher quantities of methanol are consumed. The methanol consumption has been higher and has increased over time – from 0.77 pounds per gallon of biodiesel produced in the year 2017 to 0.83 pounds per gallon in 2020. Methanol usage of 0.84 pounds is considered since the year 2021. Thus, there has been some modest gains in feedstock efficiency in the biodiesel production plants, but this has been achieved at the cost of additional methanol expenses.

Extensive analysis reported by Scott Irwin, University of Illinois, USA, indicates that rising prices of soybean oil feedstock (which is the main cost component) has adversely affected the profitability of biodiesel plants in the USA. Biodiesel prices have also increased in tandem with the soybean oil prices, but the surging soybean oil prices outpaced gains in biodiesel prices. However, the biodiesel plants faced severe losses in the year 2021. In the past, increases in soybean oil prices generally led to increases in biodiesel prices in such a way that at lease allowed producers to break even. However, since mid-2020, due to the policy driven book in the production of renewable diesel, the soybean oil prices have surged significantly. This has led to the losses for biodiesel producers. Renewable diesel production has increased significantly in the last couple of years (since mid-2020) while the biodiesel production has declined. This is evident from the comparison of monthly production data for biodiesel (fatty acid methyl ester – FAME) and renewable diesel. On year-on-year basis, the renewable diesel production increased by 37% from November 2020 to October 2021, while the biodiesel production declined by 6%. Renewable diesel is rapidly gaining market share from biodiesel. In other words, renewable biodiesel producers are outbidding biodiesel producers for the soybean oil feedstock, leading to a surge in soybean oil prices.

The following figure offers an insight into how increasing renewable diesel production has adversely affected biodiesel production in the USA in recent years.

FIGURE 1:

[SOURCE – U. S. EIA / Scott Irwin, University of Illinois]

USA – BIODIESEL PRODUCTION AND SALES

The following table presents B100 grade biodiesel production by the Petroleum Administration for Defense Districts (PADD) in the USA for three years – 2018, 2019 and 2020.

TABLE 1: BIODIESEL (B100) PRODUCTION BY PETROLEUM ADMINISTRATION FOR DEFENSE DISTRICT (PADD) [million gallons]

PADD	AREA	2018	2019	2020
PADD 1	East Coast	119	88	74
PADD 2	Midwest	1220	1166	1304
PADD 3	Gulf Coast	378	335	315
PADD 4	Rocky Mountain	(s)	(s)	(s)
PADD 5	West Coast	140	134	125
TOTAL		1857	1725	1817

[SOURCE – U. S. EIA]

The following table presents monthly production and sales of B100 biodiesel as well as sales of biodiesel blends including petroleum, for the years 2019 and 2020, in the USA.

TABLE 2: MONTHLY BIODIESEL PRODUCTION AND SALES IN USA [2019 AND 2020]

YEARS / MONTHS	2019			2020
	Production of B100 grade, million gallons	Sales of B100 grade, million gallons	Sales of biodiesel blends including petroleum, million gallons	Production of B100 grade, million gallons	Sales of B100 grade, million gallons	Sales of biodiesel blends including petroleum, million gallons
January	144	47	71	134	56	71
February	131	48	77	132	54	77
March	141	57	90	151	64	84
April	152	66	90	144	70	78
May	155	72	89	152	71	72
June	142	65	81	151	72	85
July	159	72	90	162	69	98
August	156	71	86	163	73	96
September	142	64	78	159	69	96
October	144	57	84	160	74	82
November	127	49	73	151	73	72
December	133	60	76	159	74	73
TOTAL (ANNUAL)	1725	729	987	1817	820	985

[SOURCE – U. S. EIA]

Thus, the annual B100 grade biodiesel production in the USA increased from 1725 million gallons in 2019 to 1817 million gallons in 2020, only a small increase. The sales of pure biodiesel B100 has increased on the same lines while the sales of biodiesel blends have remained almost the same.

The following figure depicts biodiesel production, exports and consumption in the USA for the past two decades.

FIGURE 2:

[SOURCE – U. S. EIA]

The above graph offers an insight into the trends in USA biodiesel production, exports and consumption from 2001 to 2020. Biodiesel exports from USA peaked in the year 2008 primarily due to an unintended effect of a biodiesel tax credit in the European Union (EU). Exports dropped later after the effect was eliminated. Increased biodiesel production and consumption from 2011 onward was largely driven by the Renewable Fuel Standard. The net exports of biodiesel flipped from positive to negative in the year 2013, indicating that the quantity of imported biodiesel exceeded the exported quantity. The growth of net exports of biodiesel since 2013 is likely due to the continued efforts of reducing the greenhouse gas emissions and increasing regulations across the globe.

Commercial Aspects - Part 4

USA OVERVIEW

Biodiesel, which is primarily a mixture of fatty acid methyl esters (FAME), is being produced, traded and consumed in the USA for the past more than twenty years. Although granular data is available for almost all these years, these data for the past twelve years (2011 to 2022) are presented in the following table. Monthly biodiesel (B100 grade) data are also provided for the full year 2021 and for the first four months of 2022. This table offers an overview of the biodiesel industry in the USA.

TABLE 1: BIODIESEL PRODUCTION, IMPORTS, EXPORTS AND CONSUMPTION IN THE USA (2011-2022)

YEAR	BIODIESEL PRODUCTION		IMPORTS	EXPORTS	BIODIESEL CONSUMPTION
	Mbbl (‘000 barrels)	MMgal (million gallons)	Mbbl (‘000 barrels)	Mbbl (‘000 barrels)	Mbbl (‘000 barrels)	MMgal (million gallons)
2011	23035	967	890	1799	21099	886
2012	23588	991	853	3056	21406	899
2013	32368	1359	8152	4675	34020	1429
2014	30452	1279	4578	1974	33735	1417
2015	30080	1263	8399	2091	35575	1494
2016	37327	1568	16879	2098	49653	2085
2017	37993	1596	9374	2228	47269	1985
2018	44222	1857	3969	2470	45326	1904
2019	41060	1725	4078	2730	43163	1813
2020	43207	1815	4684	3458	44675	1876
2021	39019	1639	4832	4342	39208	1647

MONTHLY	DATA
2021
January	3115	131	228	222	2440	102
February	2406	101	263	122	2859	120
March	3371	142	361	267	3603	151
April	3210	135	500	494	3320	139
May	3537	149	316	585	3501	147
June	3241	136	446	646	3279	138
July	3336	140	357	489	3275	138
August	3325	140	287	548	3409	143
September	2990	126	418	374	3269	137
October	3473	146	473	211	3541	149
November	3360	141	660	182	3180	134
December	3654	153	523	204	3530	148
2021 TOTAL (ANNUAL)	39019	1639	4832	4342	39208	1647

2022
January	2858	120	388	1124	1970	83
February	2710	114	121	111	2662	112
March	3163	133	636	405	3263	137
April	3024	127	672	584	3608	152
2022-4Months	11755	494	1817	2225	11503	483
2021-4Months	12102	508	1352	1104	12223	513
2020- 4Months	13351	561	1582	875	13553	569

[SOURCE – U. S. EIA]

[NOTES – Mbbl = thousand barrels. MMgal = million U. S. gallons. TBtu = trillion Btu. Biodiesel data in thousand barrels are converted to million gallons by multiplying by 0.042, and are converted to Btu by multiplying by 5.359 million Btu per barrel.]

Thus, the above table gives US biodiesel production and consumption data in thousand barrels as well as in million gallons. The imports and exports are given in thousand barrels. The conversion factors for converting thousand barrels to million gallons are also given in the notes. The conversion factor to convert the thousand barrels quantities into heat content units Btu is also given.

As can be seen from the above data, biodiesel production in the USA has grown almost steadily during the past decade. However, there have been several dips in production in some years. Imports of biodiesel in the USA fluctuated widely in the first few years, peaking in the year 2016. Later, these imports have stabilized at over four million barrels per year in the last few years. Biodiesel imports have shown a slightly rising trend in the last three years. Biodiesel exports from USA were somewhat erratic in the first five years, but remained stable at over two million barrels per year for a few years. Exports have shown a growing trend in the past two years.

GLOBAL SCENE

The leading biodiesel producing countries in the world and their 2019 production in billion litres are presented in the following table.

TABLE 2: MAJOR BIODIESEL PRODUCERS IN THE WORLD AND THEIR PRODUCTION (2019)

BIODIESEL PRODUCERS	2019 BIODIESEL PRODUCTION, billion lit
Indonesia	7.9
USA	6.5
Brazil	5.9
Germany	3.8
France	3.0
Argentina	2.5
The Netherlands	2.1
Spain	2.0
Thailand	1.7
Malaysia	1.6
Italy	1.0
Poland	1.0
China	0.6
Canada	0.3
India	0.2
TOTAL	40.1

[SOURCE – STATISTA]

The above numbers for the USA, France, the Netherlands and Italy include biodiesel production of both the types, i.e., fatty acid methyl esters (FAME) and hydrotreated vegetable oil (HVO). Figures for all other countries are for FAME biodiesel only.

Thus, the leading biodiesel producing countries in the world manufactured about 40.1 billion litres of biodiesel during the year 2019.

Biodiesel production rankings of various countries for the year 2020 are listed in the following table. Here the biodiesel includes fatty acid methyl ester biodiesel as well as hydrotreated vegetable oil (HVO) (also known as renewable diesel).

TABLE 3: BIODIESEL PRODUCTION RANKINGS AND MAJOR FEEDSTOCKS OF GLOBAL REGIONS AND COUNTRIES (2020)

COUNTRIES	BIODIESEL PRODUCTION RANKING (NUMBER); (PRODUCTION SHARE, %)	MAJOR BIODIESEL FEEDSTOCKS
USA	2 (18.1)	Soybean oil, Used cooking oils
European Union (EU)	1 (32.3)	Rapeseed (Mustard) oil, Palm oil, Used cooking oils
Brazil	4 (12.2)	Soybean oil
China	9 (2.3)	Used cooking oils
India	15 (0.5)	Used cooking oils
Canada	13 (0.7)	Canola oil, Used cooking oils, Soybean oil
Indonesia	3 (15)	Palm oil
Argentina	5 (5)	Soybean oil
Thailand	7 (3.8)	Palm oil
Colombia	11 (1.3)	Palm oil
Paraguay	19 (0.03)	Jatropha oil

[SOURCE – OECD/ FAO 2022]

Feedstock for biodiesel (and even for ethanol biofuel) products vary from country to country. The global biodiesel production will continue to be dominated by traditional feedstock despite the increasing sensitivity to the sustainability dimension of biodiesel production observed in many countries. Global biodiesel (and biofuel) production will continue to be supplied predominantly by traditional feedstocks – various vegetable oils. Biodiesel produced from used cooking oils will continue to play an important role in the European Union, Canada, USA and Singapore.

BIODIESEL PROJECTIONS

OECD and FAO have published biodiesel production and domestic consumption projections for the year 2031 in their publication titled, “OECD-FAO Agricultural Outlook 2022-2031”. These projections and the respective growth estimates for selected regions and countries of the world are presented in the following table. The growth rate is least-squares growth rate.

The OECD/FAO biodiesel outlook expects the biodiesel production and consumption to increase at a much slower pace during the projection period (2022-2031) than in previous decades primarily as a result of the USA and EU policies that are reducing support to this sector. Demand for biodiesel (and other biofuels) is expected to grow in major developing countries due to expected developments in the transportation fleets, domestic policies that favour higher blends and greater biodiesel demand from consumers. The international biodiesel (and biofuel) sectors are strongly influenced by national policies that have three major goals – farmer support, reduced GHG emissions and/or increased energy independence.

TABLE 4: GLOBAL BIODIESEL PROJECTIONS – PRODUCTION, USE AND GROWTH (2022-2031)

REGIONS / COUNTRIES	PRODUCTION, million lit		GROWTH, %	DOMESTIC USE, million lit.		GROWTH, %
	Average 2019-21 Est.	2031	2022-31	Average 2019-21 Est.	2031	2022-31
WORLD	48422	55390	-0.02	52215	56006	-0.02

NORTH AMERICA	9283	9631	-1.28	10600	10829	-1.14
Canada	379	430	0.80	454	420	-0.53
USA	8905	9202	-1.37	10145	10409	-1.17

LATIN AMERICA	8897	10835	1.65	8129	10195	1.92
Argentina	1765	2003	3.10	856	1242	7.83
Brazil	6325	7695	1.25	6307	7675	1.24
Colombia	622	856	1.72	622	856	1.72
Paraguay	12	28	5.46	12	28	5.46
Peru	173	254	2.66	333	394	1.63

EUROPE	15449	16220	-0.98	20956	18296	-1.49
European Union (EU)	14882	15599	-1.04	19312	17050	-1.50
United Kingdom (UK)	568	621	0.89	1374	977	-2.35

ASIA	14755	18652	0.66	12503	16650	1.49
China	1365	1170	-5.97	742	864	4.29
India	209	389	1.84	155	323	1.38
Indonesia	8476	10930	1.27	8006	10927	1.31
Japan	23	21	-1.00	15	16	0.05
Korea	716	637	-0.24	691	616	-0.23
Malaysia	1305	1638	2.26	842	1311	2.59
Philippines	185	279	2.24	185	279	2.24
Thailand	1443	2142	0.93	1867	2314	1.24

OCEANIA	37	51	2.14	27	36	3.17
Australia	37	51	2.14	27	36	3.18

DEVELOPED COUNTRIES	24793	25924	-1.09	31597	29176	-1.35
DEVELOPING COUNTRIES	23629	29467	1.02	20618	26830	1.65
OECD	26130	27417	-0.99	32910	30648	-1.26
BRICS	7899	9254	0.11	7204	8863	1.51

[SOURCE – OECD/ FAO 2022]

In the above data, the biodiesel production average 2019-21 estimates, the data for 2021 are estimated. The data for European Union (EU) refers to all current European Union member States, excluding United Kingdom (UK), whose data are listed separately. The China data refers to mainland China only. However, the data for Chinese Taipei, Hong Kong (China) and Macau (China) are included in the Asia aggregate figures. The OECD region listed in the above table excludes Iceland and Costa Rica but includes all EU member countries.

Over the medium term, global biodiesel (and biofuel) consumption is expected to increase further, mainly driven by higher blending targets in the developing countries. In the developed countries, biodiesel expansion will be limited due to decreasing fossil fuel demand and reduced policy incentives. International biodiesel prices are projected to increase over the outlook period (2022-2031) in nominal terms, while remaining almost constant in real terms. Biodiesel (and biofuels) prices generally relate to market fundamentals such as feedstock prices, crude oil price, and distribution costs. However, the government policies have strong impact on shaping the path of prices over time by covering part of the production costs and binding biodiesel (and biofuel) use to fossil fuels use through blending mandates. In the European Union (EU), the Renewable Energy Directive (RED) II classifies palm oil based biodiesel under a high Indirect Land Use Change (ILUC) risk category and the consumption of palm oil based biodiesel is expected to decline under these RED II requirements, resulting in decreased biodiesel consumption. Fuel consumption trends and government policy developments in the emerging economies play a significant role in biodiesel consumption. Blending mandates are expected to evolve over the projection period for some emerging economies.

World biodiesel trade is projected to decrease by 25% from current levels, largely reflecting declining demand for palm oil based biodiesel in the European Union. On the export side, biodiesel shipments from Indonesia are expected to decrease, reflecting domestic demand.

Uncertainty in the biodiesel projections arises from the assumptions about future developments in the transportation sector. Unforeseen advances in technology and potential changes in the regulatory framework may result in substantial deviations from the current market projections for biodiesel.

Commercial Aspects - Part 5

BIODIESEL PROJECTIONS [CONTINUED]

According to a report on transport fuels published in November 2021 by the International Energy Agency (IEA), conventional biodiesel made up about one third (33%) of all the biofuels produced in 2020. The conventional biodiesel is expected to contribute just 20% of all the biofuels to be produced in the year 2030. Production of biofuels is estimated to increase more than three-fold in the same period (2020 to 2030). Also, the production and share of advanced biodiesel and biokerosene as well as advanced biodiesel and biokerosene produced using carbon capture, utilization and storage (CCUS) are also projected to increase substantially in the year 2030. Therefore, even though larger quantities of vegetable oils (and waste cooking oils) will be consumed to make more conventional biodiesel in 2030 as compared to that in 2020, significantly large quantities of vegetable oils (and waste cooking oils) will also be used to make advanced biodiesel and biokerosene in the year 2030. Used cooking oils and waste animal fats provide the majority of non-food crop feedstock for biodiesel production today. However, as these feedstocks are limited, new technologies will need to be developed and commercialized to expand non-food crop biodiesel production. Also, new feedstocks will need to be identified and conversion technologies developed to utilize them economically.

Most biodiesel (and other biofuels) are consumed as transport fuels through blending at low percentages with fossil fuels (typically less than 10% by volume or unit of energy). Higher levels of biodiesel blending in the future will help increase the consumption of biodiesel in this application.

According to recent news reports, road tests are being conducted in Indonesia to increase the aplm oil based fatty acid methyl ester (FAME) biodiesel content to 40% (from the current 30%) in the transport fuel. This new blend is termed B40 blend. The Indonesian government currently mandates that all diesel sold in the country must contain 30% palm of oil based fatty acid methyl ester biodiesel (B30 blend), which is the highest compulsory blend in the world. The ongoing tests will check the viability of the new B40 blend for public use by end of the current year (2022). Indonesian government authorities had previously said that B35 biodiesel containing 35% fatty acid methyl ester biodiesel would be sold to the public this month (July 2022), but this has been delayed indefinitely, pending further laboratory tests on the blend. Efforts to increase FAME biodiesel concentrations in fuel blends have faced resistance by consumers who complain that doing so requires special handling and equipment as the fuel has a solvent effect that can corrode engine seals and gasket materials, and it can solidify at cold temperatures.

These tests in Indonesia highlight the importance of government policies and regulations in deciding the biodiesel consumption in various countries around the world. The evolution of these biodiesel blending regulations in different countries will shape the future consumption pattern of biodiesel across the globe.

INDIAN SCENE

The Government of India, through its Ministry of Petroleum and Natural Gas permitted the direct sale of pure biodiesel (B100 grade) for blending with fossil-based diesel to bulk consumers such as the Railways, State Road Transport Corporations, in the year 2015. In mid-2017, the government allowed sale of biodiesel to all consumers, mainly the oil marketing companies (OMCs) for blending with fossil-based diesel. Biodiesel procurement by these OMCs increased from 1.1 crore lit in 2015-16 to 10.56 crore lit during the year 2019-20.

Presently, biodiesel is being produced in India mainly from imported palm stearin. Other non-edible industrial oils, animal fats, used cooking oils, tallows and other oils such as acidic oils, tree-borne oils, are also used to produce biodiesel in India. To phase out imported palm stearin, measures are being taken to promote the consumption of domestically available used cooking oil (UCO) as a feedstock for the production of biodiesel. UCO has been identified as a potential raw material for biodiesel production in the National Policy on Biofuels in 2018. Used cooking oil (UCO) can be collected from hotels, restaurants, etc. for conversion to biodiesel of desired quality. Initiation of this policy in 2019 and the Food Safety and Standards Authority of India’s (FSSAI’s) Repurposed Used Cooking Oil (RUCO) project have encouraged various industry players and start-ups to enter biodiesel production. RUCO is an organization that will enable the collection and conversion of used cooking oils to biodiesel. The FSSAI authority claims that an estimated 26 billion lit of UCO could be produced in the country.

Currently, the transport sector, the railways, and aviation sectors are the major consumers of biodiesel in India. As reported in 2021, India’s biodiesel market was estimated at 0.17 million TPA despite significant setbacks during the covid pandemic. The report projected a healthy growth rate of 8.6% (CAGR) until 2030, when the biodiesel demand in the country is projected to reach 0.26 million TPA.

Several companies are developing aggregation systems to collect used cooking oils from various sources and deliver them to biodiesel production plants in several states, including Maharashtra, Karnataka, Telangana, and Gujarat. These plants have been recognized by the FSSAI to produce biodiesel from used cooking oils (UCO). From each of the urban cities in India, with a population of more than ten lakhs, over 30000 kg of used cooking oils may be collected to convert to biodiesel. Thus, the potential for collecting used cooking oils is huge in India. The Government of India is aiming for blending more than 5% of biodiesel in fossil-based diesel used in vehicles. The government has an open 105 crore lit open tender for procuring biodiesel made from used cooking oils. According to reports, even five per cent of this demand has not been met till date.

Universal Biofuels, Bio Max Fuels, Aris Bioenergy, Nova Biofuels, Emami Biotech, Eco Green Fuels, BioD Industries, Southern Biotech, Coastal Energy, are some of the leading producers of biodiesel in India.

According to a biofuels report published by the USDA-FAS in 2019, only a limited number of suppliers produce biodiesel in India and their production capacities are under-utilized due to insufficient availability of feedstock. Most of the biodiesel produced in India is consumed at local level, much of this is used in power generation. The support received through the oil marketing companies (OMCs) procurement is not enough to build commercial sales of biodiesel. Past field trials, which used jatropha, some tree-borne oilseeds and other non-edible oilseeds grown on non-arable, rainfed lands, have failed to progress. According to the report, renewable diesel is not produced in India. During the ten years to 2019, biodiesel consumption in India grew by just four per cent annually. In 2018, an estimated 83 million lit of biodiesel were blended with fossil-based diesel.

Locally produced biodiesel is often priced at 10% discount to the prevailing retail price of the fossil-based diesel, which means its price is roughly equal to diesel after accounting for the slightly lower energy density of biodiesel.

As of 2018, India had six biodiesel production plants with a combined annual capacity of 650 million lit per year. Production capacities of these plants range from 11 million lit to 280 million lit per year. Total biodiesel production in India was reportedly 185 million lit in 2018. However, the capacity utilization was only about 29%.

The following table presents biodiesel production, trade and consumption in India during the period 2011-2019.

TABLE 1: INDIA – BIODIESEL PRODUCTION, TRADE AND CONSUMPTION (2011-2019) [million lit]

YEARS	PRODUCTION	IMPORTS	EXPORTS	CONSUMPTION
2011	111	0	0	113
2012	126	0	0	125
2013	132	0.3	3.9	128
2014	138	1.7	41.5	102
2015	152	0.8	33.1	118
2016	158	2.7	41.7	119
2017	170	7.1	7.6	165
2018	180	25.2	23.1	180
2019	190	11.5	19.7	185

[SOURCE – USDA – FAS]

Production and consumption of biodiesel has increased steadily in India during 2011-2019. However, the yearly increases in quantities have been quite small. Imports and exports of biodiesel in India have been somewhat erratic in the same period. Indonesia, UAE, Malaysia, France and China were the main biodiesel suppliers to India till 2019. Major export destinations for the Indian biodiesel till 2019 were Nepal, Nigeria, Oman, Philippines and Qatar. India’s biodiesel exports in 2021 are estimated at about 50 million lit, more than a quarter of its total biodiesel production. In recent years, most of the Indian biodiesel has been exported to Europe to capitalize on the European Union (EU) incentives for waste-based biofuels.

The following table presents consumption of various feedstocks for the production of biodiesel in India during the period 2011-2019.

TABLE 2: INDIA - BIODIESEL FEEDSTOCKS CONSUMPTION [2011 – 2019]

YEARS	BIODIESEL FEEDSTOCKS CONSUMPTION, million lit
	Non-edible Industrial Oils	Used Cooking Oils (UCO)	Animal Fats and Tallow	TOTAL
2011	58	42	6	106
2012	65	48	7	120
2013	70	49	7	126
2014	75	50	6	131
2015	85	55	5	145
2016	90	55	6	151
2017	100	55	6	161
2018	110	60	8	178
2019	105	65	10	180

[SOURCE – USDA – FAS]

As reported by the USDA-FAS in mid-June 2021, the Indian biodiesel market penetration for on-road diesel remains marginal and is estimated at 0.09 %. In spite of biodiesel procurement by the oil marketing companies (OMC), biodiesel demand in the country has remained insufficient for significant growth of biodiesel industry. Lack of larger feedstock suppliers has prohibited market development. The Government of India is working on consistent use of used cooking oils (UCO) supply chain. The decade-long efforts to develop viable feedstock based on jatropha, which is grown on rain-fed, non-arable lands, have been discontinued.

Commercial Aspects - Part 6

Biodiesel and its blends have been traded internationally since many years across the globe. Biodiesel and its blends with petroleum-based diesel are listed under two different HS Codes. These codes and their descriptions are given in the following table –

TABLE 1: HS CODES RELATED TO BIODIESEL AND ITS BLENDS

HS CODE	DESCRIPTION
3826 AND 382600	Biodiesel and mixtures thereof; not containing or containing less than 70% by weight of petroleum oils or oils obtained from bituminous minerals
271020	Petroleum oils and oils from bituminous minerals, containing biodiesel, not crude, not waste oils; preparations n. e. c., containing by weight 70% or more of petroleum oils or oils from bituminous minerals

[Source – UN Comtrade Database]

Thus, these two HS codes cover different categories of biodiesel-petroleum oils blends containing less than and more than 70% petroleum oils or oils obtained from bituminous minerals. Pure or 100% biodiesel or the B100 grade of biodiesel is covered under the HS code 382600.

Interestingly, the biodiesel variants – sustainable aviation fuel (SAF) and hydrotreated vegetable oils (HVO) – are not listed in the database, indicating that these products have not been given specific HS codes.

Trade data of biodiesel by countries is available through United Nations’ Comtrade Database. The following table lists major importing countries and their imports of biodiesel and its blends under the HS code 382600 for the past several years. Thus, these numbers are for pure or 100% biodiesel and biodiesel blends containing less than 70% petroleum-based diesel, i.e., containing more than 30% biodiesel.

TABLE 2: BIODIESEL – MAJOR IMPORTERS AND THEIR IMPORTS – HS CODE 382600 (2019-2021)

YEARS	2019		2020		2021
COUNTRIES	QTY, MT	VALUE, US$	QTY, MT	VALUE, US$	QTY, MT	VALUE, US$
Austria	286448	269579297	NA	277038919	255206	404063114
Belgium	NA	1186833373	1487512	1419878575	1960484	2571802479
Belize	35	69736	NA	NA	3895	2207027
Bulgaria	443360	392600588	420302	367525843
Canada	502668	554123165	517009	478979669	504910	676651727
China	838621	557717261	NA	79939657	176081	230681572
China, Hong Kong SAR	1096	846365	1459	1123373	1866	2059858
Colombia	4993	3920897	NA	NA	<1	64
Croatia	57820	56352580	NA	44542906	71576	129780987
Cyprus	4853	5372738	8578	1073411	3827	5614653
Czechia	153075	154675278	176629	197774111	181014	323414273
Denmark	NA	90753766	88074	84563241	82609	140883361
Estonia	1320	1894794	8674	11394099	3251	6128791
France	NA	1323756102	1237917	969768325	1744345	2168570521
Germany	1409644	1364023991	1487850	1611769167	1109329	1806762701
Hungary	82246	90027757	104354	115779535	97974	174922011
Iceland	11617	16266843	3544	4193774	115	167320
Ireland	98638	118654994	149231	120291096	NA	NA
Italy	780607	719356254	NA	1140913906	1243117	1834319359
Japan	753	1062173	NA	1446248	795	1213673
Latvia	8913	8516329	4431	4680883	45414	73785055
Lithuania	37787	36298977	86577	85083704	129222	212064772
Malaysia	NA	147199173	172119	64520713	NA	60903842
Malta	1668	1701150	1503	2013003	NA	NA
Netherlands	3746708	3418232356	3968095	3930343204	4921463	7160411630
Norway	325836	373868455	213150	232043376	225928	422703210
Peru	141319	111584199	97827	77878119	NA	NA
Poland	311672	277255412	NA	294256517	388029	661188877
Rep. of Korea	7475	4979976	2227	2560116	NA	NA
Romania	159673	140204418	NA	155379600	213652	304138242
Russian Federation	8491	7931812	NA	4212649	NA	NA
Serbia	5	14397	5	14715	1140	2565073
India	5885	4392725	628	825437	1032	1476125
Slovakia	113568	116562826	113415	122241028	109001	195945745
Slovenia	142801	144987637	129569	142379077	135789	252427721
Spain	NA	1415839748	NA	1162660928	NA	1892638924
Sweden	367681	391371908	365784	395675576	406696	617675120
Switzerland	133357	165507772	130982	157030557	114357	167040538
Thailand	1459	1353501	481	534569	NA	NA
United Kingdom	1033098	1017007769	NA	1104638606	NA	1297843604
USA	NA	501945055	NA	622073648	680580	970318063

[Source – UN Comtrade Database]

The data presented above shows how the imports of biodiesel have varied over the past three years (2019 to 2021). Several countries have consistently imported large quantities of biodiesel, while others have either reduced or increased their biodiesel imports during the same period. These variations can be explained by the rise of biodiesel production as well as the biodiesel blending regulations in those respective countries. However, several countries import large quantities of biodiesel to further exports to other countries, as can be seen from the export data presented in the next table.

The following table presents major exporting countries of biodiesel in the world and their exports over the past three years, 2019 to 2021, under the HS code 382600.

TABLE 3: BIODIESEL – MAJOR EXPORTERS AND THEIR EXPORTS – HS CODE 382600 (2019-2021)

YEARS	2019		2020		2021
COUNTRIES	QTY, MT	VALUE, US$	QTY, MT	VALUE, US$	QTY, MT	VALUE, US$
Egypt	390	303571	1682	1756733	5739	8652553
Argentina	959687	732634740	596892	467976515	1146508	1429315645
Australia	2331	2183494	9895	10332269	4217	6357414
Austria	295985	309702039	288531	337049661	267782	453163675
Belgium	1177849	1175108278	1523802	1402818597	NA	2084898172
Bosnia Herzegovina	23125	21823545	NA	NA	NA	NA
Brazil	328	565661	3271	3174331	6647	9063989
Bulgaria	454547	442979519	422645	423707362	NA	NA
Belarus	1647	1494900	17	16400	NA	NA
Canada	299234	236395905	397022	363159049	387660	527406167
China	662151	591583819	911341	965136893	1293661	1799472556
China Hong Kong SAR	45103	39555385	34408	34667475	33718	39178773
Colombia	37	23933	5338	4715540	345	284214
Czechia	109885	102266057	162395	158440065	143744	212120674
Denmark	NA	49971732	54593	63506875	NA	124760593
France	647834	607926219	557229	567227552	NA	834208621
Germany	2264597	2123327977	2416335	2375879674	NA	3402498413
Hungary	89086	91897351	64187	66761980	87113	154332965
Indonesia	1118463	668158737	33908	24295133	180749	191994641
Ireland	8042	8776416	17981	20424050	NA	NA
Italy	374757	334972213	NA	634097764	552229	816147877
Japan	7922	7283637	8057	8237891	6297	6533158
Rep. of Korea	118628	109430016	191546	203675072	NA	NA
Latvia	NA	74750290	67848	74293788	90990	167030179
Lithuania	108399	105407641	126011	133897129	169030	307908550
Malaysia	NA	493273236	401665	351187357	431592	529708874
Morocco	6092	1355204	7759	1630481	NA	NA
Netherlands	3842111	3545563029	4751266	4649877818	5151702	8114994952
Norway	54722	59511212	59460	67828969	64622	107437448
Philippines	876	1103420	163	206513	117	131590
Poland	349006	312838551	364749	329851382	NA	627332723
Portugal	79387	68449180	64499	60052744	60680	84369654
Romania	3393	3642867	10162	12178637	17171	21040704
India	30208	32806762	11901	10968309	4670	6461286
Slovakia	85390	78512500	65529	69715680	72080	106792714
Slovenia	4177	3611212	110	109297	159	287964
Spain	1910192	1648489024	NA	1382972572	1827165	2601850843
Sweden	20819	21040882	13711	14657924	7686	13689510
Thailand	9996	8569950	2750	1553825	NA	NA
Turkey	3113	3044975	16858	17677385	13801	19519161
United Arab Emirates	20	24534	279	304856	4084	6684837
United Kingdom	NA	74222989	NA	55859168	NA	598353086
USA	382091	381261665	476457	380615262	NA	737318970

[Source – UN Comtrade Database]

These data reveal the trends in the international trade of biodiesel over the past three years (2019 to 2021). Similar to the biodiesel trends presented in the earlier table, these exports numbers offer an insight into the biodiesel industry as well as consumption of biodiesel in the respective countries to some extent.

Imports and exports data of biodiesel – petroleum diesel blends containing more than 70% of petroleum-based diesel are also available in the UN Comtrade database. They are not presented here as they contain less than 30% of biodiesel.

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